Congressional leaders, facing pressure to add expensive items to their tax reform legislation, could end up settling on a smaller corporate tax rate cut than originally envisioned.
In a closed-door meeting Wednesday with CEOs from the Business Roundtable, Republican Sen. Pat Toomey and White House economic adviser Gary Cohn in separate sessions told the crowd their strong preference was to keep the corporate rate at 20 percent, where it is now in the legislation, even as lawmakers were under intense pressure to find new revenue, according to three people familiar with the meeting.
Both men left the crowd with the impression that the corporate rate was a target in the hunt for that revenue and could rise as a result.
President Donald Trump broached the possibility of a 22 percent corporate rate over the weekend. A source familiar with negotiations between the House and Senate said lawmakers don’t want to raise it to 22 percent, calling it a “last resort.”
Both Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan are unhappy with Trump opening the door to the higher rate, the source said, because it undermines all the work people have been doing to get to 20 percent.
Each percentage point the corporate rate increases is worth about $100 billion over a decade. The top corporate rate is now 35 percent.
In the discussion with executives, Toomey touched on the pressures lawmakers are facing on the corporate and individual sides, including the need to placate lawmakers from high-tax states who oppose scaling back the state and local tax deduction.
Toomey told reporters Wednesday that he thinks a 22 percent corporate rate “is not likely to happen.”
“We all understand that there’s some things that are going to have to change,” he said, referring to the state and local tax deduction and a provision — called the corporate alternative minimum tax — that businesses want to get rid of. “So we’ve got to figure out how to do that.”
McConnell said Wednesday he was open to making the provision on state and local tax deductions more generous to win over numerous House Republicans when the two chambers merge their tax bills in the coming weeks. But McConnell has also adamantly opposed going above a 20 percent corporate tax rate.